Paragon Commentary

Futures File: Silver, Oil & Hogs

Sep 28, 2018

Silver Shines on Inflation Prospects

The silver market was shining Friday after a long dull period. Though gold, platinum, and copper futures closed higher on Friday too, only the “blue metal” blew over the highs of the past 30 days, drawing the attention of investors and near-panic buying from short-term speculators.

Both groups are expecting inflation to surface or even ignite as our massive deficit, political uncertainties, and cycle of tariffs could all contribute to renewed inflation. Silver holds the distinction of being relatively cheap while benefiting both from inflationary expectations and industrial demand during economic expansion.

As of midday Friday, silver traded for $14.70 per ounce.

Oil Rises as OPEC Holds Pat

Oil prices rose this week after the Organization of the Petroleum Exporting Countries (OPEC) decided to leave production levels steady. Global supplies had been falling as Iran begins to feel the pinch of U.S. sanctions, which are restricting its ability to export oil. Many had hoped that OPEC would increase production quotas to replace the missing Iranian oil and halt rising prices.

However, when the cartel left levels steady, that sparked concerns that the nations may already be near maximum capacity, which encouraged investors to swoop into the oil market. As of midday Friday, November crude oil futures traded for $73.40 per barrel, an 11-week high.

Hog Prices Stampede Higher

Hog prices ran to new highs this week as ongoing concerns about African Swine Fever (ASF) sparked buying. ASF is continuing to expand across China, raising concerns that millions of hogs may need to be slaughtered to stem the spread of the disease. Meanwhile, 15 cases have been found in wild boar in Belgium, prompting other nations to stop buying their pork due to the outbreak.

These actions could prompt more demand for U.S. pork, which helped spur a rally to 63 cents per pound, near a two-month high.

Despite the recent price jumps, the longer-term fundamentals of the markets seem bearish. Frozen inventories of pork are up by over 6% over the last year, while nationwide cattle and hog herds are expanding, indicating that future supplies of animals and meat should be even higher.